Slovenia

Legal framework of investing in Slovenia

Three Acts of Law have allowed this recent member of the EU to favour foreign investors

On 1 May 2004 Slovenia became a member of the European Union. In terms of the main development indicators and purchasing power, in 2003 Slovenia was at 77% of the present EU-25 average. According to the Slovenian Statistical Agency, GDP per capita in 2004 stands in Slovenia at €13,103. In the second half of the nineties, Slovenia recorded high economic growth, yearly 4.3% on average (4.2% in 2004). Exports and foreign trade flows in general have been the main driving force of growth, besides investments. Index of openness of the economy, measured by exports and imports of goods and services relative to annual gross domestic product ranges from 115% to 120% and is among the highest in Europe.

The largest share of trade — around 60% — was recorded with the EU-15. Trade with the new EU-10 member states has been on the rise, as well as with the countries of South-Eastern Europe. Also USA and Russia are among the most important of Slovenia’s trading partners. In Slovenia, investments represented around 24% of GDP and are — as a component of domestic demand — an important impetus of economic activity. Investment in equipment in industry and services and business and residential building construction are among the main spurs, together with motorway construction and other civil engineering works.

Today Slovenia has an open and non-discriminatory legal regime, which is aligned with the EU acquis communautaire and grants national treatment to all foreign investors. The cornerstones of this regime are the Commercial Companies Act, Takeovers Act and Foreign Exchange Act.

Commercial Companies Act

The Commercial Companies Act, adopted in 1993, made companies with and without foreign equity participation equal as far as their establishment, registration and operation is concerned. It provides for six types of corporations, three of them being personal corporations (ie unlimited liability company, partnership and silent company) and the other three capital corporations (limited liability company, joint stock company and limited/joint stock partnership). The Act also provides for the establishment of interest groupings and foreign companies’ branches. The Act does not differentiate between domestic and foreign ownership.

Moreover, there are no restrictions imposed either on the management, proxies or composition of company boards, and both managers and board members in foreign investment enterprises can be foreign nationals. Adoption of the Commercial Companies Act in 1993 was an important step in affirmation of the national treatment principle. This Act abolished a number of stipulations of the Foreign Investment Act. It determines the essential framework of investing in Slovenia, regardless of nationality or country of origin. There are also no requirements relating to the choice of the language employed by the management in a particular company. Slovenia awaits changes of the Act due to introduction of European Company (SE) and EURO.

The Takeovers Act

The Takeovers Act was adopted in 1997 and represents another piece of Slovenian legislation of major importance for foreign investors. The Act regulates foreign acquisition fully in accordance with the national treatment principle. It requires any potential acquirer in any acquisition of 25 or more per cent of shares of listed companies (with some exemptions), to publicly announce its acquisition intention and to offer to buy shares of all existing shareholders at the same price. The main purpose of this Act is to protect investors participating in the securities market and minority shareholders of companies where the transfer of a controlling stake occurs. The Takeovers Act and Commercial Companies Act are important for Mergers and Acquisitions of companies, as they both regulate the procedures and consequences of mergers and acquisitions.

The Foreign Exchange Act

The Foreign Exchange Act is the only piece of legislation which specifically deals with FDI and it has introduced a general freedom for inward and outward FDI. According to the Foreign Exchange Act, a direct investment is an investment made by an investor for the purpose of establishing permanent economic relations and gaining effective influence on the management of a company or other legal subjects.

Labour market

The labour market has certain weaknesses, as it is perhaps not flexible enough, in order to enable the employers’ fast acclimatisation to changing environment and circumstances. Government plans specific reforms to make this faster acclimatisation possible.

FDI grant scheme

Grants are available for foreign investments in industry, strategic services and R&D. Incentives are eligible for up to 40% cost of infrastructure and utility connections, cost of construction or purchase of buildings, as well as purchase of new machinery and equipment. In 2005, there is approx. €3.75 million allocated for grants.

Slovenia offers in general a stable and safe regulatory framework of investing. However, relatively high real estate price, long procedures for establishment of a company and costs related to it are, from the perspective of investing, often seen as weaknesses.

Although there is still room for improvement Slovenia offers a safe, flexible and non-discriminatory legal environment for doing business in which it has managed to incorporate some attractive features to make itself more open and interesting to foreign investors. Specifically, foreign investors may benefit from an attractive location for expansion or relocation of existent operations for medium and large family companies, Slovenia representing a gateway to SE Europe and especially Balkan states, post-privatisation concentration of ownership (Slovenian companies are looking for foreign strategic partners) and privatisation of the remaining state-owned industries (insurance companies, energy, telecommunications, transport infrastructure).

Profile

Colja, Rojs & Partnerji is one of the largest law firms in Slovenia, probably the largest specialising in business and commercial law. This specialisation as business lawyers has enabled us to provide a broad range of legal consultation and advisory services and experienced guidance, not only to local clients but also to foreign clients. Our clients are companies, ranging from large global corporations to small high-tech start-ups, commercial banks, investment banks, other financial institutions, insurance companies, multinational institutions, trade associations, local and international agencies, as well as governments and nonprofit- making organisations.

We have always stood at the forefront of developments in legal matters in Slovenia. From 1991, the year when Slovenia gained independence, we have been involved in many large business transactions in Slovenia — direct investments, takeovers and portfolio investments. We have also advised on a number of business transactions undertaken in other countries of the Ex-Yu region and since the beginning of 2003 we have also been present in Belgrade.

Principal practice areas

CORPORATE
COMMERCIAL AGREEMENTS
MERGERS AND ACQUISITIONS
PRIVATISATION AND REORGANISATION
SECURITIES AND CAPITAL MARKETS
COMPETITION
REAL ESTATE AND PROPERTY
LITIGATION, ARBITRATION AND DISPUTE RESOLUTION
DEBT RECOVERY, INSOLVENCY
CONSTRUCTION
BANKING
INTELLECTUAL PROPERTY
HEALTH CARE
LABOUR LAW

Contact details:
Colja, Rojs & Partnerji, Attorneys-at-law, Tivolska 48, Ljubljana, Slovenia
Tel: +386 (0) 1 2306750, +386 (0) 1 2306754 - Fax: +386 (0) 1 4325123 - E-mail: Crp@colja-rojs-partnerji.si - Website: www.colja-rojs-partnerji.si

All pages are copyright of © Roxby Media Ltd - European American Business is a Roxby Media publication.